The Ben Bernanke Federal Reserve Semi-Annual Follies

July 22nd, 2010

Twice yearly the chairman of the U.S. Federal Reserve, Ben Bernanke, must testify before Congress on monetary policy and the Fed’s economic outlook. Bernanke has achieved during his time as a principal policymaker on the U.S. economy an enviable reputation for poor forecasting and a unique ability to put a happy, optimistic face on the global economic crisis. However, is his most recent testimony before Congress, Bernanke gave hints that he is losing his laudable ability at spinning bad economic realities into “green shoots” of an imminent recovery.

Amid all the worthless Bernanke verbosity that the world has become accustomed to (e.g. “although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth” ), there was a single sentence that betrays how even Bernanke is running scared that his policies of unprecedented public debt and quantitative easing are leading to disaster. The once pompously arrogant but now uncertain Fed chairman told Congress, “even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.”

After adding trillions of dollars to the national debt, more than a trillion dollars in worthless assets to the Fed’s balance sheet and opening up its subsidized discount window to the likes of Goldman Sachs, the best Bernanke can mutter to the politicians in Washington is, “the economic outlook remains unusually uncertain.”

If Bernanke is publicly admitting that the economic outlook for the United States is unusually uncertain, I think we can cross off his previous forecast about green shoots.